Intra-Class Conflict Dooms Auto Insurance Class Action in Fifth Circuit

Last week the Fifth Circuit issued a short opinion that made an important point that does not arise often in class certification decisions. Class certification failed because the plaintiffs’ proposed theory of liability would benefit only some class members and disadvantage others, who would be overpaid if the plaintiffs’ theory were correct. For that reason alone, the plaintiffs could not adequately represent the class.

Prudhomme v. Government Employees Insurance Company, No. 21-30157, 2022 WL 510171 (5th Cir. Feb. 21, 2022) (per curiam) was similar to another case I recently wrote about—the plaintiffs claimed that their insurer undervalued their vehicles that were deemed total losses, in violation of Louisiana statutes. Sidestepping questions about commonality and predominance, which are usually the focus of class certification decisions, the Fifth Circuit affirmed the denial of class certification because the adequacy of representation requirement was not met. This was because “a portion of the proposed class members received payments above (that is, benefitted from) the allegedly unlawful valuation.” According to the district court opinion, an expert witness opined that approximately one-fifth of the class would have received less on the plaintiffs’ theory than they received from GEICO. While the plaintiffs argued that class members who were overpaid on their theory might still be entitled to some damages under Louisiana law, that would likely create a typicality problem. Class representatives cannot adequately represent a class if they offer “a theory of liability that disadvantages a portion of the class they allegedly represent.”

Look out for this type of issue the next time you are litigating a class action. It might be lurking in your case when you peel back the onion.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.
For more articles about class-action lawsuits, visit the NLR Litigation section.

Fitness App Agrees to Pay $56 Million to Settle Class Action Alleging Dark Pattern Practices

On February 14, 2022, Noom Inc., a popular weight loss and fitness app, agreed to pay $56 million, and provide an additional $6 million in subscription credits to settle a putative class action in New York federal court. The class is seeking conditional certification and has urged the court to preliminarily approve the settlement.

The suit was filed in May 2020 when a group of Noom users alleged that Noom “actively misrepresents and/or fails to accurately disclose the true characteristics of its trial period, its automatic enrollment policy, and the actual steps customer need to follow in attempting to cancel a 14-day trial and avoid automatic enrollment.” More specifically, users alleged that Noom engaged in an unlawful auto-renewal subscription business model by luring customers in with the opportunity to “try” its programs, then imposing significant barriers to the cancellation process (e.g., only allowing customers to cancel their subscriptions through their virtual coach), resulting in the customers paying a nonrefundable advance lump-sum payment for up to eight (8) months at a time. According to the proposed settlement, Noom will have to substantially enhance its auto-renewal disclosures, as well as require customers to take a separate action (e.g., check box or digital signature) to accept auto-renewal, and provide customers a button on the customer’s account page for easier cancellation.

Regulators at the federal and state level have recently made clear their focus on enforcement actions against “dark patterns.” We previously summarized the FTC’s enforcement policy statement from October 2021 warning companies against using dark patterns that trick consumers into subscription services. More recently, several state attorneys general (e.g., in Indiana, Texas, the District of Columbia, and Washington State) made announcements regarding their commitment to ramp up enforcement work on “dark patterns” that are used to ascertain consumers’ location data.

Article By: Privacy and Cybersecurity Practice Group at Hunton Andrews Kurth

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

Texas AG Sues Meta Over Collection and Use of Biometric Data

On February 14, 2022, Texas Attorney General Ken Paxton brought suit against Meta, the parent company of Facebook and Instagram, over the company’s collection and use of biometric data. The suit alleges that Meta collected and used Texans’ facial geometry data in violation of the Texas Capture or Use of Biometric Identifier Act (“CUBI”) and the Texas Deceptive Trade Practices Act (“DTPA”). The lawsuit is significant because it represents the first time the Texas Attorney General’s Office has brought suit under CUBI.

The suit focuses on Meta’s “tag suggestions” feature, which the company has since retired. The feature scanned faces in users’ photos and videos to suggest “tagging” (i.e., identify by name) users who appeared in the photos and videos. In the complaint, Attorney General Ken Paxton alleged that Meta,  collected and analyzed individuals’ facial geometry data (which constitutes biometric data under CUBI) without their consent, shared the data with third parties, and failed to destroy the data in a timely matter, all in violation of CUBI and the DTPA. CUBI regulates the collection and use of biometric data for commercial purposes, and the DTPA prohibits false, misleading, or deceptive acts or practices in the conduct of any trade or commerce.

Among other forms of relief, the complaint seeks an injunction enjoining Meta from violating these laws, a $25,000 civil penalty for each violation of CUBI, and a $10,000 civil penalty for each violation of the DTPA. The suit follows Facebook’s $650 million class-action settlement over alleged violations of Illinois’ Biometric Privacy Act and the company’s discontinuance of the tag suggestions feature last year.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.

How Many Whistleblowers Does It Take to Make Flying Safe?

Answer: at least seven. Seven whistleblowers who are either current or former employees of the Federal Aviation Administration (FAA), Boeing, and GE came forward to the U.S. Senate Committee on Commerce, Science, and Transportation (“Committee”) to report safety issues related to “aircraft safety and certification environment at the FAA and within the industry.” In response to these whistleblowers sharing their experiences as aviation industry engineers and the safety issues they observed, the Committee drafted the Aircraft Certification, Safety, and Accountability Act, which was enacted in December 2020.

Whistleblowers initially reported concerns to the Committee following two Boeing 737 MAX-8 catastrophes in 2018 and 2019, incidents which the Committee investigated extensively. The Aircraft Certification, Safety, and Accountability Act extended Federal whistleblower protections to employees, contractors, and suppliers of aircraft manufacturers. Since the passage of the Act, whistleblowers continued to engage with the Committee, alerting the Committee to continuing issues within the aviation industry.

According to the December 2021 “Aviation Safety Whistleblower Report” from the Democratic staff of the Committee, the major issues whistleblowers highlighted include:

Undue pressure on line engineers and production staff

  • One of the whistleblowers reported being in an “untenable position” of both having to test for the FAA and prepare aircraft engines to pass the FAA’s tests.

Line engineers with technical expertise ignored

  • Engineers who raised safety concerns and supply chain non-compliances at Boeing were “sidelined.”

Boeing oversight office in Seattle lacks enough safety engineers

  • Office was “chronically understaffed with only 25 engineers and technical project managers to oversee approximately 1,500 Boeing engineers who act on behalf of FAA.”

FAA certification processes do not require compliance with latest airworthiness standards

  • One whistleblower pointed out that the FAA was using “dated airworthiness standards” to certify aircraft safety and that some issues were “creatively hidden or outright withheld” from the FAA.

FAA’s strong oversight eroded under the Organization Design Authorization (ODA) program

  • The report alleges that the FAA has “over time, increasingly delegated away its authority” which leads to “safety issues at significant costs” in human lives and reputational harm.

FAA and industry struggle with technical engineering capacity necessary for complex aircraft systems

  • Automation in aviation manufacturing presents new safety challenges and demands “a significant amount of technical knowledge at the FAA,” said one of the whistleblowers.

If You See Something, Say Something

Fortunately, the whistleblowers offered recommendations for actions the FAA could take to implement fully the key provisions of the Aircraft Certification, Safety, and Accountability Act. They proposed more direct supervision of ODA staff by the FAA and that the FAA should ensure engineers with sufficient technical expertise are part of Boeing’s Aviation Safety Oversight Office (BASOO). As the whistleblowers pinpointed that some of the safety issues with the Boeing 737 MAX-8 may have stemmed from rushed production schedules and “undue pressure,” they recommended a review of Boeing’s safety culture. Other sections of the Aircraft Certification, Safety, and Accountability Act that the whistleblowers allege FAA has not yet addressed include: requiring that aviation manufacturers implement safety management systems, limiting delegation of certain safety tasks, performing an annual safety culture assessment within the Administration, and mandating an “integrated aircraft safety analysis of designs.”

These whistleblowers are a prime example of industry insiders using their expertise to highlight safety issues and possible wrongdoing that affect taxpayers (funding the FAA) and consumers (everyone who flies on an airplane). The Committee’s report notes, “Whistleblowers perform a critical public service by exposing wrongdoing in the government and private sector.” Aviation manufacturing insiders with information about safety violations are encouraged to step forward, as they can help thwart wrongdoing and preserve the future of safe air travel.

This article was written by Eva Gunasekera and Renee Brooker  of Tycko & Zavareei law firm. For more articles about whistleblowing, please click here.

 

As the California Attorney General Focuses on Loyalty Programs, What Do Companies Need to Remember?

The California attorney general (AG) celebrated data privacy day by doing an “investigative sweep” of the loyalty programs of retailers, supermarkets, home improvement stores, travel companies, and food service companies, and sending out notices of non-compliance to businesses that the AG’s office believes might not be fully compliant with the CCPA. As the AG focuses its attention on loyalty programs, the following provides a reminder of the requirements under the CCPA.

What is a loyalty program?

Loyalty programs are structured in a variety of different ways. Some programs track dollars spent by consumers; others track products purchased. Some programs are free to participate in; others require consumers to purchase membership. Some programs offer consumers additional products; other programs offer prizes, money, or products from third parties. Although neither the CCPA nor the regulations implementing the CCPA define a “loyalty program,” as a practical matter most, if not all, loyalty programs have two things in common: (1) they collect information about consumers, and (2) they provide some form of reward in recognition of (or in exchange for) repeat purchasing patterns.[1]

What are the general obligations under the CCPA?

Because loyalty programs collect personal information about their members, if a business that sponsors a loyalty program is itself subject to the CCPA, then its loyalty program will also be subject to the CCPA. In situations in which the CCPA applies to a loyalty program, the following table generally describes the rights conferred upon a consumer in relation to the program:

Right Applicability to Loyalty Program
Notice at collection A loyalty program that collects personal information from its members should provide a notice at the point where information is being collected regarding the categories of personal information that will be collected and how that information will be used.[2]
Privacy notice A loyalty program that collects personal information of its members should make a privacy notice available to its members.[3]
Access to information A member of a loyalty program may request that a business disclose the “specific pieces of personal information” collected about them.[5]
Deletion of information A member of a loyalty program may request that a business delete the personal information collected about them. That said, a company may be able to deny a request by a loyalty program member to delete information in their account based upon one of the exceptions to the right to be forgotten.
Opt-out of sale A loyalty program that sells the personal information of its members should include a “do not sell” link on its homepage and permit consumers to opt-out of the sale of their information. To the extent that a consumer has directed the loyalty program to disclose their information to a third party (e.g., a fulfillment partner) it would not be considered a “sale” of information.
Notice of financial incentive To the extent that a loyalty program qualifies as a “financial incentive” under the regulations implementing the CCPA (discussed below), a business should provide a “notice of financial incentive.”[4]

Are loyalty programs always financial incentive programs?

Whether a loyalty program constitutes a “financial incentive” program as that term is defined by the regulations implementing the CCPA depends on the extent to which the loyalty program’s benefits “relate to” the collection, retention, or sale of personal information.”[6] While the California Attorney General has implied that all loyalty programs “however defined, should receive the same treatment as other financial incentives,” a strong argument may exist that for many loyalty programs the benefits provided are directly related to consumer purchasing patterns (i.e., repeat or volume purchases) and are not “related” to the collection of personal information.[7] If a particular loyalty program qualifies as a financial incentive program, a business should consider the following steps (in addition to the compliance obligations identified above):

  • Notify the consumer of the financial incentive.[8] The regulations implementing the CCPA specify that the financial incentive notice should contain the following information:
    • A summary of the financial incentive offered.[11] In the context of a loyalty program a description of the benefits that the consumer will receive as part of the program would likely provide a sufficient summary of the financial incentive.
    • A description of the material terms of the financial incentive. [12] The regulation specifies that the description should include the categories of personal information that are implicated by the financial incentive program and the “value of the consumer’s data.”[13]
    • How the consumer can opt-in to the financial incentive.[14] Information about how a consumer can opt-in (or join) a financial incentive program is typically conveyed when a consumer reviews an application to join or sign-up with the program.
    • How the consumer can opt-out, or withdraw, from the program. [15] This is an explanation as to how the consumer can invoke their right to withdraw from the program.[16]
    • An explanation of how the financial incentive is “reasonably related” to the value of the consumer’s data.[17] While the regulations state that a notice of financial incentive should provide an explanation as to how the financial incentive “reasonably relates” to the value of the consumer’s data, the CCPA requires only that a reasonable relationship exists if a business intends to discriminate against a consumer “because the consumer exercised any of the consumer’s rights” under the Act.[18] Where a business does not intend to use its loyalty program to discriminate against consumers that exercise CCPA-conferred privacy rights, it’s not clear whether this requirement applies. In the event that a reasonable relationship must be shown, however, the regulations require that a company provide a “good-faith estimate of the value of the consumer’s data that forms the basis” for the financial incentive and that the business provide a “description of the method” used to calculate that value.[19]
  • Obtain the consumer’s “opt in consent” to the “material terms” of the financial incentive,[9] and
  • Permit the consumer to revoke their consent “at any time.”[10]

FOOTNOTES

[1] FSOR Appendix A at 273 (Response 814) (including recognition from the AG that “loyalty programs” are not defined under the CCPA, and declining invitations to provide a definition through regulation).

[2] Cal. Civ. Code § 1798.100(a) (West 2021); Cal. Code Regs. tit. 11, 999.304(b), 305(a)(1) (2021).

[3] Cal. Code Regs. tit. 11, 999.304(a) (2021).

[5] Cal. Civ. Code § 1798.100(a).

[4] CAL. CODE REGS. tit. 11, 999.301(n); 304(d); 307(a), (b).

[6] CAL. CODE REGS. tit. 11, 999.301(j) (2021).

[7] FSOR Appendix A at 75 (Response 254).

[8] Cal. Civ. Code § 1798.125(b)(2) (West 2021).

[11] CAL. CODE REGS. tit. 11, 999.307(b)(1) (2021).

[12] CAL. CODE REGS. tit. 11, 999.307(b)(2) (2021).

[13] CAL. CODE REGS. tit. 11, 999.307(b)(2) (2021).

[14] CAL. CODE REGS. tit. 11, 999.307(b)(3) (2021).

[15] CAL. CODE REGS. tit. 11, 999.307(b)(4) (2021).

[16] Cal. Civ. Code § 1798.125(b)(3) (West 2021).

[17] CAL. CODE REGS. tit. 11, 999.307(b)(5) (2021).

[18] Cal. Civ. Code § 1798.125(a)(1), (2) (West 2021).

[19] CAL. CODE REGS. tit. 11, 999.307(b)(5)(a), (b) (2021).

[9] Cal. Civ. Code § 1798.125(b)(3) (West 2021).

[10] Cal. Civ. Code § 1798.125(b)(3) (West 2021).

©2022 Greenberg Traurig, LLP. All rights reserved.
For more articles about data privacy, visit the NLR Cybersecurity, Media & FCC section.

New Poll Underscores Growing Support for National Data Privacy Legislation

Over half of all Americans would support a federal data privacy law, according to a recent poll from Politico and Morning Consult. The poll found that 56 percent of registered voters would either strongly or somewhat support a proposal to “make it illegal for social media companies to use personal data to recommend content via algorithms.” Democrats were most likely to support the proposal at 62 percent, compared to 54 percent of Republicans and 50 percent of Independents. Still, the numbers may show that bipartisan action is possible.

The poll is indicative of American’s increasing data privacy awareness and concerns. Colorado, Virginia, and California all passed or updated data privacy laws within the last year, and nearly every state is considering similar legislation. Additionally, Congress held several high-profile hearings last year soliciting testimony from several tech industry leaders and whistleblower Frances Haugen. In the private sector, Meta CEO Mark Zuckerberg has come out in favor of a national data privacy standard similar to the EU’s General Data Protection Regulation (GDPR).

Politico and Morning Consult released the poll results days after Senator Ron Wyden (D-OR) accepted a 24,000-signature petition calling for Congress to pass a federal data protection law. Senator Wyden, who recently introduced his own data privacy proposal called the “Mind Your Own Business Act,” said it was “past time” for Congress to act.

He may be right: U.S./EU data flows have been on borrowed time since 2020. The GDPR prohibits data flows from the EU to countries with inadequate data protection laws, including the United States. The U.S. Privacy Shield regulations allowed the United States to circumvent the rule, but an EU court invalidated the agreement in 2020, and data flows between the US and the EU have been in legal limbo ever since. Eventually, Congress and the EU will need to address the situation and a federal data protection law would be a long-term solution.

This post was authored by C. Blair Robinson, legal intern at Robinson+Cole. Blair is not yet admitted to practice law. Click here to read more about the Data Privacy and Cybersecurity practice at Robinson & Cole LLP.

For more data privacy and cybersecurity news, click here to visit the National Law Review.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Legal Considerations for Ready-to-Drink Cocktails

The ready-to-drink cocktail or “RTD” category has exploded in recent years, and it’s occupied by more than merely craft distillers familiar with a carefully made cocktail. Brewers, distillers and even vintners have joined in, capitalizing on consumers’ desires for pre-made, no-fuss beverages. The most unexpected development to emerge with RTDs, however, is the legal complexity surrounding these products—something the industry is only beginning to understand.

Many of these legal issues stem from the fact that the legal regulatory landscape in most states has not caught up with the rapidly evolving alcohol industry. That leaves ready-to-drink cocktails, much like hard seltzers, as not having a specific class or type in certain states. Suppliers looking to enter the space have plentiful options when creating a new product, subject to what licenses the manufacturer holds and what those licenses allow them to produce.

Ready-to-drink cocktails can be spirits, malt, sugar, cider or wine-based. The base of the RTD product, nonetheless, is the key federal factor. It is also an important factor in most states when determining how the product will be treated from a legal perspective in the following areas:

  • Licensing needed to manufacture, distribute and sell the product;
  • Applicable franchise law (Do beer franchise laws apply to low-proof spirits?);
  • Available channels of distribution (Can you sell this product in grocery or convenience store?);
  • Excise tax rate charged to the manufacturer (Does state law have a lower excise tax rate for low ABV products?);
  • Labeling and advertising considerations (Is your product a modified traditional product?); and
  • Trade practice considerations/promotions (Do spirits laws apply?).

Industry members dabbling in a sphere that is relatively new to the market, state regulators and legislatures should be mindful of the patchwork of emerging regulations. Like hard seltzer, ready-to-drink cocktails are not a clearly defined category under existing alcohol law. Meanwhile, states are working quickly to legislate in this domain. New Jersey is considering a reduced alcoholic beverage tax rate on low-ABV liquors to align with the beer tax rate (NJ SB 701), Vermont is considering legislation to define “low alcohol spirits beverage” and treat it as a “vinous beverage” (VT HB 590) and the Washington State Senate has a bill pending that would establish a tax on low-proof beverages (WA SB 5049).

From franchise issues to excise tax, the issues discussed here are only a glimpse of the nuanced and complicated legal landscape that governs the distribution of RTDs and alcoholic beverages across all categories.

© 2022 McDermott Will & Emery

Greenwashing and the SEC: the 2022 ESG Target

A recent wave of greenwashing lawsuits against the cosmetics industry drew the attention of many in the corporate, financial and insurance sectors. Attacks on corporate marketing and language used to allegedly deceive consumers will take on a much bigger life in 2022, not only due to our prediction that such lawsuits will increase, but also from Securities & Exchange Commission (SEC) investigations and penalties related to greenwashing. 2022 is sure to see an intense uptick in activity focused on greenwashing and the SEC is going to be the agency to lead that charge. Companies of all types that are advertising, marketing, drafting ESG statements, or disclosing information as required to the SEC must pay extremely close attention to the language used in all of these types of documents, or else run the risk of SEC scrutiny.

SEC and ESG

In March 2021, the SEC formed the Climate and Environmental, Social and Governance Task Force (ESG Task Force) within its Division of Enforcement. Hand in hand with the legal world’s attention on greenwashing in 2021, the SEC’s ESG Task Force was created for the sole purpose of investigating ESG-related violations. The SEC’s actions were well-timed, as 2021 saw an enormous increase in investor demand for ESG-related and ESG-driven portfolios. There is considerable market demand for ESG portfolios, and whether this demand is driven by institute influencers or simple environmental and social consciousness among consumers is of little importance to the SEC – it simply wants to ensure that ESG activity is being done properly, transparently and accurately.

Greenwashing and the SEC

The SEC has stated that in 2022, it will be taking direct aim at greenwashing issues on many different levels in the investment world. As corporations and investment funds alike increasingly put forth ESG-friendly statements pertaining to their actions or portfolio content, the law has thus far failed to keep pace with the increasing ESG statement activity. It is into this gap that the SEC sees itself fitting and attempting to ensure that the public is not subject to greenwashing. In order to tackle this objective, expect the SEC to focus on the wording used to describe investments or portfolios, what issuers say in filings, and the statements made by investment houses and advisors related to ESG.

From this stem several topics that the SEC’s ESG Task Force will scrutinize, such as: whether “ESG investments” are truly comprised of companies that have accurate and forthright ESG plans; the level of due diligence conducted by investment houses in determining whether an investment or portfolio is “ESG friendly”; how investment world internal statements differ from external public-facing statements related to the level of ESG considerations taken into account in an investment or portfolio; selling “ESG friendly” investments with no set method for ensuring that the investment continues to uphold those principles; and many others.

2022, the SEC, and ESG

Given the SEC’s specific targeting of ESG-related issues beginning in 2021, we predict that 2022 will see a great degree of SEC enforcement action seeking to curb over zealous marketing language or statements that it sees as greenwashing. Whether these efforts will intertwine with the potential for increased Department of Justice criminal investigation and prosecution of egregious violators over greenwashing remains to be seen, but it is nevertheless something that issuers and investment firms alike must closely consider.

While there are numerous avenues to examine to ensure that ESG principles are being upheld and accurately conveyed to the public, the underlying compliance program for minimizing greenwashing allegation risks is absolutely critical for all players putting forth ESG-related statements. These compliance checks should not merely be one-time pre-issuance programs; rather, they should be ongoing and constant to ensure that with  ever-evolving corporate practices, a focused interest by the SEC on ESG, and increasing attention by the legal world on greenwashing claims, all statement put forth are truly “ESG friendly” and not misleading in any way.

Article By John Gardella of CMBG3 Law

For more environmental legal news, click here to visit the National Law Review.

©2022 CMBG3 Law, LLC. All rights reserved.

CFPB Solicits Whistleblowers to Strengthen Enforcement of Consumer Financial Protection Laws

In its revamped whistleblower webpage, the CFPB is enlisting the help of whistleblowers to provide tips about the following issues:

  • Any discrimination related to consumer financial products or services or small businesses
  • Any use of artificial intelligence/machine learning models that is based on flawed or incomplete data sets, that uses proxies for race, gender, or other group characteristics, or that impacts particular groups or classes of people more than others;
  • Misleading or deceptive advertising of consumer financial products or services, including mortgages
  • Failure to collect, maintain, and report accurate mortgage loan application and origination data
  • Failure to provide or use accurate consumer reporting information
  • Failure to review mortgage borrowers’ loss mitigation applications in a timely manner
  • Any unfair, deceptive, or abusive act or practice with respect to any consumer financial product or service.

The CFPB has also announced that it seeks tips to help it combat the role of Artificial Intelligence in enabling intentional and unintentional discrimination in decision-making systems.  For example, a recent study of algorithmic mortgage underwriting revealed that Black and Hispanic families have been more likely to be denied a mortgage compared to similarly situated white families.

Proposed CFPB Whistleblower Reward Program

Currently, there is no whistleblower reward program at the CFPB and sanctions collected in CFPB enforcement actions do not qualify for SEC related action whistleblower awards.  In light of the success of the SEC’s Whistleblower Program as an effective tool to protect investors and strengthen capital markets, the CFPB requested that Congress establish a rewards program to strengthen the CFPB’s enforcement of consumer financial protection laws.

In September 2021, Senator Catherine Cortez Masto introduced the Financial Compensation for Consumer Financial Protection Bureau Whistleblowers Act (S. 2775), which would establish a whistleblowers rewards program at the CFPB similar to the SEC Whistleblower Program.  It would authorize the CFPB to reward whistleblowers between 10% to 30% of collected monetary sanctions in a successful enforcement action where the penalty exceeds $1 million.  And in cases involving monetary penalties of less than $1 million, the CFPB would be able to award any single whistleblower 10% of the amount collected or $50,000, whichever is greater.

The Financial Compensation for CFPB Whistleblowers Act is cosponsored by Chairman of the Senate Banking, Housing, and Urban Affairs Committee Senator Sherrod Brown and Senators Dick Durbin, Elizabeth Warren, Jeff Merkley, Richard Blumenthal, and Tina Smith. In the House, Representative Al Green introduced a companion bill (H.R. 5484).

A whistleblower reward program at the CFPB could significantly augment enforcement of consumer financial protection laws, including laws barring unfair, deceptive, or abusive acts and practices.  The CFPB has authority over a broad array of consumer financial products and services, including mortgages, deposit taking, credit cards, loan servicing, check guaranteeing, collection of consumer report data, debt collection associated with consumer financial products and services, real estate settlement, money transmitting, and financial data processing.  In addition, the CFPB is the primary consumer compliance supervisory, enforcement, and rulemaking authority over depository institutions with more than $10 billion in assets.

Hopefully, Congress will act swiftly to enact the Financial Compensation for CFPB Whistleblowers Act.

Protection for CFPB Whistleblowers

Although Congress did not establish a whistleblower reward program when it created the CFPB, it included a strong whistleblower protection provision in the Consumer Financial Protection Act of 2010 (CFPA).  The anti-retaliation provision of the Consumer Financial Protection Act provides a cause of action for corporate whistleblowers who suffer retaliation for raising concerns about potential violations of rules or regulations of the CFPC.

Workers Protected by the CFPA Anti-Retaliation Law

The term “covered employee” means “any individual performing tasks related to the offering or provision of a consumer financial product or service.”  The CFPA defines a “consumer financial product or service” to include “a wide variety of financial products or services offered or provided for use by consumers primarily for personal, family, or household purposes, and certain financial products or services that are delivered, offered, or provided in connection with a consumer financial product or service . . . Examples of these include . .. residential mortgage origination, lending, brokerage and servicing, and related products and services such as mortgage loan modification and foreclosure relief; student loans; payday loans; and other financial services such as debt collection, credit reporting, credit cards and related activities, money transmitting, check cashing and related activities, prepaid cards, and debt relief services.”

Scope of Protected Whistleblowing About Consumer Financial Protection Violations

The CFPA protects disclosures made to an employer, to the CFPB or any State, local, or Federal, government authority or law enforcement agency concerning any act or omission that the employee reasonably believes to be a violation of any CFPB regulation or any other consumer financial protection law that the Bureau enforces. This includes several federal laws regulating “unfair, deceptive, or abusive practices . . . related to the provision of consumer financial products or services.”

Some of the matters the CFPB regulates include:

  • kickbacks paid to mortgage issuers or insurers;
  • deceptive advertising;
  • discriminatory lending practices, including a violation of the Equal Credit Opportunity Act (“ECOA”);
  • excessive fees;
  • any false, deceptive, or misleading representation or means in connection with the collection of any debt; and
  • debt collection activities that violate the Fair Debt Collection Practices Act (FDCPA).

Some of the consumer financial protection laws that the CFPB enforces include:

  • Real Estate Settlement Procedures Act;
  • Home Mortgage Disclosure Act;
  • Equal Credit Opportunity Act;
  • Truth in Lending Act;
  • Truth in Savings Act;
  • Fair Credit Billing Act;
  • Fair Credit Reporting Act;
  • Electronic Fund Transfer Act;
  • Consumer Leasing Act;
  • Fair Debt Collection Practices Act;
  • Home Owners Protection Act; and
  • Secure and Fair Enforcement for Mortgage Licensing Act

Reasonable Belief Standard in Banking Whistleblower Retaliation Cases

The CFPA whistleblower protection law employs a reasonable belief standard.  As long as the plaintiff’s belief is reasonable, the whistleblower is protected, even if the whistleblower makes a mistake of law or fact about the underlying violation of a law or regulation under the CFPB’s jurisdiction.

Prohibited Retaliation

The CFPA anti-retaliation law proscribes a broad range of adverse employment actions, including terminating, “intimidating, threatening, restraining, coercing, blacklisting or disciplining, any covered employee or any authorized representative of covered employees” because of the employee’s protected whistleblowing.

Proving CFPA Whistleblower Retaliation

To prevail in a CFPA whistleblower retaliation claim, the whistleblower need only prove that his or her protected conduct was a contributing factor in the adverse employment action, i.e., that the protected activity, alone or in combination with other factors, affected in some way the outcome of the employer’s decision.

Where the employer takes the adverse employment action “shortly after” learning about the protected activity, courts may infer a causal connection between the two.  Van Asdale v. Int’l Game Tech., 577 F.3d 989, 1001 (9th Cir. 2009).

Filing a CFPA Financial Whistleblower Retaliation Claim

CFPA complaints are filed with OSHA, and the statute of limitations is 180 days from the date when the alleged violation occurs, which is the date on which the retaliatory decision has been both made and communicated to the whistleblower.

The complaint need not be in any particular form and can be filed orally with OSHA. A CFPA complaint need not meet the stringent pleading requirements that apply in federal court, and instead the administrative complaint “simply alerts OSHA to the existence of the alleged retaliation and the complainant’s desire that OSHA investigate the complaint.” If the complaint alleges each element of a CFPA whistleblower retaliation claim and the employer does not show by clear and convincing that it would have taken the same action in the absence of the alleged protected activity, OSHA will conduct an investigation.

OSHA investigates CFPA complaints to determine whether there is reasonable cause to believe that protected activity was a contributing factor in the alleged adverse action.  If OSHA finds a violation, it can order reinstatement of the whistleblower and other relief.

Article By Jason Zuckerman of Zuckerman Law

For more financial legal news, click here to visit the National Law Review.

© 2021 Zuckerman Law

Senate Bill Would Amend FIFRA to Prohibit Dangerous Pesticides and Cancel Registrations of Organophosphates, Neonicotinoids, and Paraquat

On November 23, 2021, Senator Cory Booker (D-NJ) announced his intention to reintroduce the Protect America’s Children from Toxic Pesticides Act of 2021, that would amend the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) “to [protect fully] the safety of children and the environment, to remove dangerous pesticides from use, and for other purposes.” Similar legislation was introduced in the House (H.R. 7940) and Senate (S. 4406) in 2020, but the bills did not move out of committee.

Ending Indefinite Delays on Review of Dangerous Pesticides

The bill would amend FIFRA Section 2 to add a provision regarding registration review determination, defined as “the final decision to renew the registration of a pesticide product or active ingredient to authorize the use of the pesticide product or active ingredient” for an additional 15-year period from the date of the previous registration, reregistration, or registration review determination and in compliance with all applicable laws and regulations. Registration review determinations would not include any intermediate determination regarding the continued use of pesticide product or active ingredient.

The bill would allow an interested person to petition the U.S. Environmental Protection Agency (EPA) to designate an active ingredient or pesticide product as a dangerous pesticide, which would be defined as an active ingredient or pesticide product that may:

  • Be carcinogenic;
  • Be acutely toxic;
  • Be an endocrine disruptor;
  • Cause harm to a pregnant woman or a fetus; or
  • Cause neurological or developmental harm.

EPA would have 90 days after receiving the petition to make a finding as to whether the petition presents substantial scientific information indicating that the designation of the petitioned active ingredient or pesticide product as a dangerous pesticide may be warranted. If EPA fails to make a finding, the active ingredient or pesticide product would be deemed to be a dangerous pesticide. In making its finding, EPA “shall fully consider all relevant evidence,” including epidemiological studies or data; peer-reviewed literature; and data generated by a federal or state agency or an agency of a foreign government.

If EPA issues a finding that an active ingredient or pesticide product may warrant designation as a dangerous pesticide, the registration would be suspended immediately and remain suspended until EPA makes a registration review determination. The continued sale and use of existing stocks of a suspended active ingredient or pesticide product would be prohibited. If EPA fails to suspend the registration of an active ingredient or pesticide product that may warrant designation as a dangerous pesticide by no later than 60 days after any deadline described in this subsection, the registration of the active ingredient or pesticide product would be “immediately and permanently canceled” and the sale of existing stocks would be prohibited.

Emergency Review of Other Pesticides Banned in Other Nations

The bill would amend FIFRA Section 6 to require EPA to suspend immediately the registration of any active ingredient or pesticide product that is banned or otherwise prohibited from entering the market by the European Union (EU), one or more EU member states, or Canada. EPA would then complete an expedited review of the justification and rationale for the ban. Unless EPA determines that the decision was “clearly erroneous,” the suspended registration would be canceled not later than two years after the date of completion of the review. EPA “shall fully consider all relevant evidence,” including epidemiological studies or data; peer-reviewed literature; and data generated by a federal or state agency or an agency of a foreign government. In determining whether the ban was “clearly erroneous,” EPA would be prohibited from considering “any economic analysis of the benefits or costs of continuing to register the pesticide.” Before making a final determination, EPA would provide the draft determination for a comment period of not less than 90 days.

Ensuring Accountability in Conditional Registrations

The bill would amend FIFRA Section 3(c)(7) to provide registrants only two years to meet the terms and requirements of conditional registration. If a registrant fails to comply with the conditions by the earlier of the deadlines established by EPA or two years after the effective date of the conditional registration, EPA would cancel the conditional registration. Conditional registrations outstanding at the time the bill is enacted for which the registrant has not met the conditions would be canceled. The continued sale and use of existing stocks of a pesticide for which the conditional registration has been canceled would be prohibited.

Prohibition on the Sale or Use of Existing Stocks of Suspended or Canceled Pesticides

The bill would amend FIFRA Section 6(a) to prohibit the sale or use of existing stocks of a pesticide for which the registration is suspended or canceled, or vacated or set aside by judicial decree.

Amending Emergency Exemption Provisions

The bill would amend FIFRA Section 18 to limit emergency exemptions for the same active ingredient or pesticide product in the same location to two years in any ten-year period. EPA would no longer grant emergency exemptions to use an active ingredient or pesticide product that is not registered for any use or that is registered conditionally.

Adding Transparency for Inert Ingredients

The bill would amend FIFRA Section 2(n) to require that the ingredient statement include:

  • The name and percentage of each active ingredient in the pesticide product;
  • The name and percentage of each inert ingredient in the pesticide product;
  • If applicable, a statement that the pesticide product contains an inert ingredient determined by a state or federal agency, or the Administrator based on epidemiological data or peer-reviewed literature, to be likely:
    • To be carcinogenic;
    • To be an endocrine disruptor;
    • To be acutely toxic;
    • To cause harm to pregnant women or fetuses; or
    • To cause neurological or developmental harm.

The bill would amend FIFRA Section 3(c)(9) so that any required label or labeling must provide a complete list of inert ingredients.

Cancellation of Registration of Organophosphates

On the date of enactment, the bill would deem all organophosphate pesticides “to generally cause unreasonable adverse effects to humans,” and the registration of all uses of organophosphate pesticides would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of an organophosphate or any pesticide chemical residue that results from organophosphate use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of organophosphate pesticides would be prohibited on the date of enactment. The bill would not allow any future organophosphate registrations and organophosphate pesticides would be ineligible for emergency use.

Cancellation of Registration of Neonicotinoids

On the date of enactment, the bill would deem all active ingredients and pesticide products containing one or more of the active ingredients imidacloprid, clothianidin, thiamethoxam, dinotefuran, acetamiprid, sulfoxaflor, and flupyradifurone (neonicotinoid pesticides) “to generally cause unreasonable adverse effects to the environment,” and the registration of all uses of neonicotinoid pesticides would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of a neonicotinoid pesticide or any pesticide chemical residue that results from neonicotinoid pesticide use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of neonicotinoid pesticides would be prohibited on the date of enactment. The bill would not allow any future neonicotinoid registrations and neonicotinoid pesticides would be ineligible for emergency use.

Cancellation of Registration of Paraquat

On the date of enactment, the bill would deem paraquat “to generally cause unreasonable adverse effects to humans,” and the registration of all uses of paraquat would be “immediately and permanently canceled by operation of law and without further proceedings.” Tolerances and exemptions that allow the presence of paraquat or any pesticide chemical residue that results from paraquat use in or on food would be revoked within six months of the date of enactment. The continued sale or use of existing stocks of paraquat would be prohibited on the date of enactment. The bill would not allow any future paraquat registrations and paraquat would be ineligible for emergency use.

Empowering Communities to Protect Themselves from Pesticides

The bill would amend FIFRA Section 24 to extend the authority of a state to regulate the sale or use of any federally registered pesticide or device to “any political subdivision of a State.”

Protecting Farmworkers from Dangerous Pesticides

The bill would amend FIFRA Section 3(c)(9) to require that labels be printed in both English and Spanish. If a pesticide product is known to be used in agriculture by more than 500 individual persons or applicators who speak the same language other than English or Spanish, EPA will provide a translation of the label in that language on its website. The bill would amend FIFRA to include a section concerning farmworker safety. Employers of farmworkers would be required to report to EPA farmworker incidents, defined as exposure of a farmworker to an active ingredient, a pesticide product, a tank mixture of multiple pesticides, a metabolite, or a degradate that results in:

  • An illness or injury:
    • Requiring medical attention or hospitalization of the farmworker; or
    • That requires the farmworker to stop working temporarily or permanently;
  • A permanent disability or loss in function of the farmworker; or
  • Death of the farmworker.

The bill would require EPA to implement an online system to facilitate the reporting of farmworker incidents within 60 days of the bill’s enactment. The online system must allow for anonymous reporting to protect farmworkers from retaliation. Employers that fail to report a farmworker incident would be fined $1,000 per day beginning on the eighth day after the farmworker incident occurs. Employers that knowingly fail to report or that pressure or coerce a farmworker not to report would be liable for a criminal penalty of up to $100,000, six months in prison, or both. The bill calls for EPA to implement a reward system that provides a monetary award of not less than $25,000 per person per farmworker incident that leads to the identification of one or more employers that have failed to report a farmworker incident.

Within 15 days of receiving a report of a farmworker incident, EPA would transmit a report of the incident to the manufacturer of each involved pesticide product and the manufacturer of each involved active ingredient or ingredients. If a farmworker incident results in the death of a farmworker, the pesticide product or active ingredient that caused the death would be immediately suspended, pending a review. Pesticide product manufacturers who receive a farmworker incident report would have 60 days to provide EPA an assessment of the incident, including whether any changes to the label of the pesticide product or active ingredient are warranted at the time of the assessment to avoid future farmworker incidents. Active ingredient manufacturers who receive a report of a farmworker incident would have 60 days to provide to EPA an assessment of the farmworker incident, including whether any changes to the pesticide product or active ingredient are warranted at the time of the assessment to avoid future farmworker incidents.

No later than the earlier of 90 days after receiving an assessment from a pesticide product or active ingredient manufacturer or 180 days after the occurrence of the farmworker incident, EPA will make a draft determination as to whether a change in the label of an involved pesticide product is warranted. EPA will publish its draft determination in the Federal Register for a 30-day comment period. No later than 30 days after the close of the public comment period, EPA will make a final determination as to whether the label should be changed and publish its decision in the Federal Register.

If EPA makes a final determination that the label of the applicable product must be changed and the manufacturer of the pesticide product or active ingredient fails to do so, the pesticide product or active ingredient “shall be immediately and permanently canceled by operation of law and without further proceedings.” If a pesticide product or active ingredient is responsible for ten or more farmworker incidents of any type, or three or more incidents resulting in death, and the pesticide product or active ingredient has not received a final determination regarding a registration review during the preceding 15-year period, EPA will “immediately suspend the pesticide product or active ingredient until a final determination is made regarding the registration review of the pesticide.”

Authority to Bring Civil Action

The bill would amend FIFRA Section 16 to allow any person to bring a civil action where there is an alleged failure of EPA to comply with any of its provisions. The U.S. District Courts would have exclusive jurisdiction over such actions.

Employee Protection

The bill would amend FIFRA to add a section regarding employee protection. Employers would be prohibited from discharging or discriminating against an employee because the employee has commenced or is about to commence a proceeding under the Act, has testified in a proceeding, or has assisted or participated in a proceeding. Employees would have 30 days from the date of the alleged violation to file a complaint with the Secretary of Labor and the Secretary would have 30 days to conduct an investigation.

Commentary

This bill is unlikely to become law any time soon. This legislation, or anything like it in terms of its presumption that pesticides approved by EPA under current law are fundamentally flawed, would present a radical change to current EPA authority and procedures. Advocates of such change believe otherwise, and point to the fact that FIFRA has not been amended for 25 years. Whether this is sufficient to garner broad support of national environmental and consumer advocacy groups is unclear. Assuming it gains the support of at least a handful of Democrats in the Senate, along with a likely House companion bill, this legislation lays the groundwork for advocating eventual changes to FIFRA. This approach takes a page from the Toxic Substances Control Act (TSCA) reform playbook. Certain Members of Congress and TSCA stakeholders established policy positions for reform five or more years before reauthorization occurred. Similar to TSCA, the legislation is premised on the view that FIFRA is fundamentally flawed, a widely held view with TSCA reform. This view is not widely shared with regard to FIFRA, however. Critics of this proposed legislation will argue that EPA has been effective at implementing FIFRA driven by the requirements of the 1996 Food Quality Protection Act amendments, following a rigorous scientific process with various required safety factors to determine that pesticides used on food meet a “reasonable certainty of no harm” standard. In that view, this bill may be a solution in search of a problem. If this legislation is indeed used as a starting point for reform, there will be many more years before any common ground is found — and common ground likely will be essential for any kind of meaningful FIFRA “modernization.”

©2021 Bergeson & Campbell, P.C.

Article by Bergeson & Campbell, P.C.‘s Government Regulation practice group.
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